Tax Changes Will Affect Alimony Payments

By
Roscich & Martell Law Firm, LLC
|January 12, 2018

There are many changes in the new tax law that was signed into law on December
22, 2017. One way in which the new law will affect divorcing couples is
through the elimination of the
alimony deduction. Spouses who are ordered to pay alimony to a former spouse will
no longer be able to deduct these payments from their federal income for
tax purposes.

Under the former tax law, a person who was ordered to pay alimony was allowed
to deduct the monthly payments from their income. This could make a significant
difference if the person making the payments was ordered to pay a large
sum in alimony. In Illinois, spousal maintenance is not mandatory, it
is awarded if a court makes a determination that maintenance should be
awarded. A couple can also agree that maintenance will be awarded and
determine the amount, either before the marriage or after. The ability
to deduct this income could be a factor in negotiating the amount of alimony
to be paid if the couple was proceeding by agreement. It may also affect
how prenuptial agreements regarding alimony are drafted.

Previously, the spouse receiving the alimony payments would not get the
money tax free and would have to report it as income and pay taxes on
it. This provision changes with the new law and the spouse receiving the
alimony payments will not have to pay taxes on that income. This may create
an incentive for a spouse who will be receiving alimony as part of a divorce
to delay the finalization of the divorce until 2019.

The new changes essentially mean the spouses are exchanging tax liabilities,
and the government gets more money from the couple in most cases. Money
paid for child support will continue to be treated as nontaxable income
for the recipient, and not deductible by the parent making the payment.

The elimination of this deduction will apply to divorces that are signed
on or after December 31, 2018. This means that couples who are already
divorced, or whose divorces will be finalized before December 31, 2018,
can continue claiming this deduction. This may cause a lot of couples
who are already in the process of divorce to try and finalize negotiations
faster in order to meet this deadline.

Contact Us for Legal Assistance

If you are considering a divorce or in the middle of a divorce now, these
new changes may affect how the divorce is finalized. In order to find
out how the changes will affect your ability to receive spousal maintenance
and the amount you may receive in spousal maintenance, contact the
Naperville family law attorneys at the Roscich & Martel Law Firm, LLC for a consultation.

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